The Future of Specialty Foods

I’d be remiss if I started talking about the upcoming 10-year horizon for food trends and didn’t ground it in what has transpired over the past 10 years, because these future trends will have much to do with already-known paths. These paths are now converging at breathtaking speed, and the wave they’ve caused is crashing right into the once indomitable world of “Big Food.”

Let me explain. The food industry has been undergoing change as disruptive and socially significant as any political revolution. It started with the realization that there’s a deep connection between our eating habits and our health. Consumers learned to become more mindful of how and what they eat. This cleared the way for countless new businesses to spring up with the mission of serving these needs. Specialty food began to take on a new meaning and mandate. It was no longer only about the fancy, the luxurious, the exotic and the uncommon foods to be enjoyed on rare occasions.

The shift was radical: We were suddenly thinking of specialty food as serving our everyday nutritional and health needs, reversing ailments, being preventive—in short, a way of eating consciously. Whether answering food allergies, maintaining energy levels, keeping our kids from early-onset diabetes by not plying them with sugar-packed sodas or improving gut health, specialty food acquired a profound new sense of purpose.

Illustration by Oliver Balez

While smaller brands have gained in popularity on account of their ability to serve these needs, big brands have been severely challenged amid this disruption. Readers of this magazine are acutely aware, and I’ve written previously for WGB, that many iconic big brands and large companies have steadily lost market share as smaller brands have achieved prominence. Big food companies have spent the past decade focused on trying to build their businesses in ways that appealed to their shareholders and retailers but missed all the evident signs of burgeoning consumer interest in more healthful diets—and the necessary innovations in food that would make those diets possible. With the spotlight on short-term gains, long-term investments in innovation took a back seat in many major consumer packaged goods brands, leading to the current state of affairs—namely, relatively dry pipelines that do not appeal to today’s consumer.

In the next 10 years, the pressure on America’s Big Food markers is only going to continue. Market share losses will be greater and divesting of regional brands will accelerate. The specialty food movement—directly addressing consumers’ deep desires to eat healthily, know their food’s provenance, engage in the experience and connect with social causes—already represents about 14% of total market share. We see this segment as capable of quickly increasing to 20%. The next decade will bring further divestiture of food conglomerates by private equity funds. We expect to see investors moving their money out of food manufacturing and into technology that is focused on food distribution—innovations such as automated warehousing, predictive intelligence in logistics and advanced blockchain platforms.

Continuing the specialty tide, emerging new brands currently focusing on “upcycled” foods (scraps from all-natural food ingredients turned into new edible products) will pioneer new product categories and redefine the frozen food and prepared meals categories. Those same brands will ignite mission-driven work focused on solving hunger and reducing food waste. The hypergrowth of sustainable B Corporations will accelerate investments in purposeful companies that serve humanity. They’ll continue to introduce us to a new crop of food entrepreneurs that are philanthropists first.

Trends in the grocery business driven by the acceptance of specialty foods will drive new shopping venues. Large national grocery retailers will acquire or develop joint ventures with pharmacy chains, consolidating that retail category—meaning fewer stores—while at the same time attracting higher-end beauty and cosmetic retailers into food stores with brands such as Sephora, Ulta and Bluemercury. The click-and-collect in-store pick service segment will also continue to grow significantly.

To keep up with trends, big brands will need to better leverage technology and will need to make investments in incubators and accelerators to drive new product development and launch smaller emerging brands that are innovative, fleet of foot and totally focused on what consumers want. These new innovators will make big inroads through small steps, impacting the market that big brands used to dominate through sheer scale and hefty advertising.

Top Trends to Watch 

As the specialty food industry hits a record year of growth with an anticipated $150 billion or more in sales for 2019, we’ll see a continued focus in 2020 on the health benefits and sustainability concerns that have driven food and beverage trends. But there’s also some room for fun, whether in the form of canned cocktails or globally inspired condiments. Here’s a roundup of what the Specialty Food Association’s independent Trendspotter panel sees coming in the next 10 years.

Plants as Plants/Meat Replacement Pushback: Across retail and foodservice, plant-based meat alternatives are undeniably popular. Growth will continue, but consumers are also returning to real fruits and vegetables. They’re concerned about supply chains, water usage and food safety, prompting renewed interest in plants as plants.

Sustainability-Driven Product Development: Upcycled products, those using ingredients that are normally discarded, will become more prevalent. Recent products to market have included tea made from discarded avocado leaves, frozen pizzas made with toppings from vegetable scraps and whey beverages made from leftover products of cheese making. Products that address agricultural practices and protecting the health of the land are in.

Fermented Condiments: The combined expanding interest in fermentation and Korean cuisine will converge to bring the fermented condiment gochujang to the forefront. One of the backbones of Korean cooking, gochujang, a red chile paste, is made with fermented soybeans, seasonings and glutinous rice; it is often used in marinades, dipping sauces, soups and stews.

Prebiotic Foods Gain Awareness: Prebiotics are types of dietary fiber that feed the friendly bacteria in the gut and are found in foods such as bananas, asparagus, seaweed and barley, among others. More of these ingredients will hit the spotlight, with early examples including bars and crunchy snacks made with prebiotic-rich barley and buckwheat.

Protein Trend Takes Unexpected Turns: Anchovies and noodles? Consumer awareness of the importance of protein is prompting them to seek out interesting sources in their diets. Anchovies, sardines and other small jarred or tinned fish are primed to take off. While these products have always been around, they’ve traditionally appealed to a narrow audience. They’ll be stylishly marketed to millennials and GenZers as “not your grandfather’s herring.” Protein-packed pastas also are on the rise—we’re seeing more noodles made from seafood and nutrient-packed noodles containing minerals and dietary fiber.

Convenient Cocktails and Mocktails: Thanks to a slew of new mixers, tonics and garnishes, consumers can now make bar-quality cocktails at home. We expect more cocktails in cans and bottled mocktails that offer sophisticated alternatives for non-drinkers.

Dairy-Free Products: Dairy alternatives, oat and nut-bas
ed milks in particular, will continue to reign in the yogurt, beverage, creamer and frozen dessert sections of the store. One need only think about how Oatly has marketed itself.

Fermented Beverages: Refrigerated, ready-to-drink functional fermented beverages have grown 55% in retail sales in the past year. Probiotic-friendly kombucha has led the charge, while drinking vinegars, which are high in probiotics, amino acids and antioxidants, are also gaining in popularity. 

Regional Cuisines of Asia, West Africa and Latin America: This top trend of 2019 will continue in the new year as consumers’ curiosity and knowledge base grows. Look for flavors and ingredients from these regions to show up everywhere—especially in spices, sauces and bases.

Cannabis and CBD Everything: Trendspotters see continuing growth in products across categories containing cannabidiol (CBD) and cannabis, especially as the market gains a greater understanding of its incorporation as an ingredient. It’s expected that within the next three years the legislative environment will provide regulation and guidelines for the legalization of this sought-after ingredient. New adjacent product categories and lucrative implications on manufacturing will bring the food industry one of the most significant new revenue streams in history.

Though it’s long been known that going into food is a high-risk enterprise, there has actually never been a better time than right now to be a food entrepreneur. Whether it’s megatrends such as global hot sauces, where the heat has traveled from the Caribbean to all corners of Africa; a renaissance in high-protein frozen desserts featuring dairy alternatives and international flavors; your latest brand of water; nutritious grains in the form of sprouted varieties or fiber-rich barley and buckwheat; or mushrooms of many varieties becoming ubiquitous due to their nutritional and medicinal benefits, food will continue to go upscale.

Driven by younger generations, the American palate has expanded to become more adventurous and consumers have determined that smaller-batch and more locally produced products are preferred and worth paying for. In the food industry right now, it’s totally feasible to start a business in your kitchen, leverage it at an industry incubator, build buzz via social media and become an overnight national success. It’s a great time to be a creative in food.

Phil Kafarakis is president of the New York-based Specialty Food Association, an umbrella organization representing more than 4,000 innovative, entrepreneurial member companies in the food and beverage industry. He can be reached at [email protected] and followed at @PresidentSFA.